1. A company has total fixed costs of $180,000 and a contribution margin ratio of 30%. How much sales are

1.   A company has total fixed costs of $180,000 and a contribution margin ratio of 30%. How much sales are necessary to break even?  

        $540,000

        $600,000  

        $54,000

        $126,000 

2.    How much sales are required to earn a target income of $70,000, if total fixed costs are $100,000 and the contribution margin ratio is 40%? 

        $400,000

        $200,000

        $330,000

        $425,000    

3.   For which one of the following budgeting aspects does the budget committee generally have the responsibility? 

        Setting company goals.

        Expressing the budget in financial terms.

        Enforcing the budget.

        Serves as a review board where managers can defend budget goals and requests.

4.   Which one of the following would most likely cause an unrealistic budget to result?  

        All levels of management contributed to its development.

        The budget has been developed in a participative approach.

        The budget has been developed in a top down fashion.

        The budget was developed after considerable planning.

5.   What three differences exist between long-range planning and budgeting?  

        Amount of detail, content, and emphasis

        Time periods involved, amount of detail, and content

        Content, emphasis, and amount of detail

        Emphasis, time periods involved, and amount of detail

6.   Which one of the following is a source of information used to prepare the budgeted income statement?  

        Cash budget

        Budgeted balance sheet

        Selling and administrative expense budget

        Capital expenditure budget

7.   When is a static budget most appropriate in evaluating a manager’s performance?  

        When actual costs incurred equal the amounts on the budget.

        When the actual activity level is less than the master budget activity.

        The static budget is not appropriate for evaluating managers.

        When the company performed at the same activity level as the static budget level.

8.   Which type of center is the toy department in a Wal-Mart store?  

        An exception center

        A profit center

        A cost center

        An investment center

9.   For which of the following is an investment center manager responsible?  

        Invested assets, sales, and costs

        Sales, profits, and invested assets

        Sales, invested assets, and assets

        Revenues and costs

10.   An investment center generated a contribution margin of $200,000, controllable fixed costs of $100,000 and sales of $1,000,000. The center’s average operating assets were $400,000. How much is the return on investment?

        25%    

        175%

        50%

        75%